Regardless of their reputation, most penny shares wrestle to ship on explosive guarantees. But when Filtronic (LSE:FTC), the agency appears to have overwhelmed the percentages and gone on to ship ginormous returns for loyal shareholders.

Shares of the digital aerospace tools group have skyrocketed by 1,212% over the past 5 years. Meaning a £1,000 funding in March 2020’s now price £12,120. And since 2025 kicked off, the now small-cap agency has surged by an additional 45%.

What’s behind this? And might this momentum proceed to ship one other 10x return in future?

Partnering with SpaceX is worthwhile

Filtronic has been making progress over time. However it wasn’t till final April that development kicked up a notch. Following a profitable partnership with Elon Musk’s SpaceX, Filtronic secured a $19.7m (£15.8m) contract to provide E-band SSPA modules for the Starlink Undertaking. These digital parts allow high-speed communication throughout 5G and different wi-fi networks.

The influence of this deal has been made completely obvious within the newest interim outcomes launched in the beginning of February. Income surged from £8.5m to £25.6m throughout the six months resulting in November 2024. On the similar time, working earnings jumped from a lack of £0.4m to a achieve of £6.8m. And administration’s already been deploying this additional capital to broaden manufacturing capability and develop its headcount.

It was just a few days later that Filtronic made one other announcement of a contract signed with SpaceX valued at $20.9m (£16.8m) to be delivered earlier than Might 2026. It appears its now largest buyer is sort of proud of the product and is coming again for extra.

One other 10-bagger?

Seeing a 200% bounce in income is undeniably a trigger for celebration. So it’s no shock to see Filtronic’s share price rise out of penny inventory territory. Nonetheless, might or not it’s able to delivering 12 months one other quadruple-digit achieve over the following 5 years?

Offering that the SpaceX contracts are fulfilled on time and to satisfaction, new alternatives will seemingly emerge. Not simply with SpaceX however with different aerospace and satellite tv for pc companies which have taken discover of Filtronic’s technological capabilities.

Nonetheless, whether or not that can translate into one other 1,000% share price return, I’m not so sure. Why? As a result of at a market-cap of £230m, it appears plenty of this anticipated development’s already baked into the inventory price. It’s additionally price mentioning that a part of its take care of SpaceX granted the aerospace enterprise the best to accumulate roughly 10% of Filtronic’s fairness by way of share warrants.

SpaceX could resolve to accumulate Filtronic for its expertise. In fact, that is pure hypothesis. Nonetheless, whereas a takeover bid would seemingly ship the shares flying, a 1,000% buyout premium appears unbelievable.

What to observe

Proper now, I really feel Filtronic shares are absolutely valued by way of their potential. So this isn’t a enterprise I’m speeding so as to add to my portfolio right this moment. Nonetheless, for present shareholders, a brand new important threat has simply emerged. Virtually all of Filtronic’s newfound income development stems from a single buyer – SpaceX.

Ought to the connection break down, or Filtronic’s parts merely gained’t be wanted anymore, changing this misplaced revenue can be a critical problem for administration. Within the worst-case situation, Filtronic might tumble again into penny inventory territory. I don’t see it as one to contemplate.